Video Game Exec Claims Used Games 'Cheat' Developers

from the lets-learn-you-some-economics dept

For whatever reason, every few months or so, yet another clueless video game company exec spouts off about how the used video game market is somehow unfair or hurting video game developers. We've seen it again and again and again. However, since a whole bunch of you keep submitting the story that Cory Ledesma from THQ has made the downright laughable claim that the used video game market "cheats" developers, it seemed worth discussing.

This shows a fundamental misunderstanding of the law, basic economics and the customers THQ is failing to serve. On the law, Ledesma and others should familiarize themselves with the First Sale doctrine before making silly statements. On economics, repeated studies have shown that a healthy secondary market for products actually significantly helps the primary market. If you take more than a second and a half to think about it, it's easy to understand why. If there's a healthy secondary market for products, it reduces the risk for the buyers in the primary market. That is, if they buy the product and don't like it, they know they'll be able to resell it and recoup some of their losses. That makes it effectively cheaper for them to buy the primary product, increasing the number of sales. On top of that, the secondary market also helps in markets like video games in acting as a good way to segment the market, and get new buyers into a game or series of games. I'm sure many of the folks who are now buyers in the primary market, at one time purchased an earlier game in a series used. How is it that so many video gaming execs have so much trouble recognizing these basic concepts?

Reader Comments

It doesn't just reduce the risk, it reduces the cost of short term ownership as well, which is probably more important for something like a video game that potentially people only want to own for a short time before being done with it.

If the used market is very active, it probably means that a lot of customers don't really think the item is worth the price they are asking for it (if they did, they would hold onto it, rather than selling it).

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An active secondary market doesn't necessarily mean that customers don't think it's worth the original price, but that the value of continued ownership is less than the secondary market price.

The utility you get from buying the game is the value of the fun you get from playing/owning it + any resale value. Having a solid resale value is part of the price, not something which means that the price is too high.

One major example of this is the stock market. This has to be about the most well known secondary market around!

Companies sell equity when they list or have new stock issues directly to investors in the primary market. These investors can then go on to sell their equity on a secondary market, such as stock exchanges. Indeed, without the ability to sell equity easily, investors would be less willing to buy in the first place - and would pay less for the same stake in the company.

Basically the amount someone is willing to invest = income from a share in the profits + amount on sale of share at a future date ( = income + capital gain returns).

Of course, I wonder if these executives who are decrying the used game market are similarly decrying the stock exchange. How long would their companies last if they weren't easily able to raise equity capital? And more importantly are any of these executives willing to give up their share options?

You want more, I want to pay less. So what?

I could buy a game new, and pirate a second game from the same developer, and they would see some money that way. According to this argument, that's better than buying two games used. So, OK. I wouldn't mind that, but would they?

You bet your ass they'd mind it. They don't want *some* money, they want whatever money they decide they should be paid, and if there's a way to make your brother pay, and your sister pay, and your mates pay too, then so be it.

It's not enough to say the developers want your money. They want as much of your money as they can get, and they're going to make you feel bad about it until they get it.

Well, I want to pay as little money for their games as possible, and I don't feel the least bit bad about doing that.

They can implement countermeasures if they like, but chances are I'll go elsewhere.

Hell, if you're killing online gaming for used buyers, I might as well pirate - the product's the same, and apparently the developers don't mind it any more than buying used... or are they going to change their arguments then?

Re: You want more, I want to pay less. So what?

I think it's more fair to say that publishers and executives want your money. Developers are often salaried, may or may not receive incentives in the form of sales or performance bonuses, and are just as often as not laid off after the game ships.

Re: Re: You want more, I want to pay less. So what?

Re: You want more, I want to pay less. So what?

You make a good point about the used and pirate copies being the same game.

It used to be that by pirating, you wouldn't get the online features. Now, if both used and pirated games lack online modes, someone who is willing to forgo the online mode might as well pirate as buy used.

Killing the used market but helping the publishers nought. Good plan, THQ.

What about Ford?

Shouldn't Ford get a cut every time one of their vehicles are sold on the used market? What about books, movies, and the billions of other items on eBay? In fact, why shouldn't I get a cut off all of that too while they are at it?

I can understand the perspective. They see several people playing off the same lisence, while the game publisher only gets paid for a single one.

Given that games are generally only played once if single player, its a strong desire to make it require registration like Steam or Relic games. Or they could include a good multiplayer so players can get more playtime out of it.

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"Given that games are generally only played once if single player"

I've never understood this assumption. Maybe it's true of some people, but certainly it isn't universal. Most of the games I've played that were good I kept to play again. Many are titles in which that makes sense (MVP Baseball, Madden, etc.), but many are single player games not related to sports:

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The problem is, if your game is only worth playing once, then it's perceived value to the customer is less. This low value is offset by them being able to resell sell it, so they aren't completely blowing their money on something they will only play once. It's simple, if they couldn't resell, they wouldn't buy it, because it isn't worth that much money to them unless they can recoup some of the cost later.

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Nail on head, right here. I'm just replaying Bioshock for the 4th time, and I think it's one of the best games I've played for many years and enjoy the hell out of it. I'll preorder Bioshock Infinite as soon as I can. Other games, I've ditched 2 days later because they weren't good, or they were far too short. Even then, I wouldn't take the risk on a lot of games at anything near full price, because for every Bioshock, there's several true wastes of code.

Time to play's also a factor. I completed Lost Odyssey a few weeks ago - that is, I got 100% of the XBox achievements as well as completing the game. Total time? Nearly 80 hours. That's value for money, even if it took me a long time to get round to doing it (I have a looong backlog of games). But, some other games can take less than 4 hours - a rip off.

I also sometimes use second hand games to evaluate new releases. For example, I picked up a cheap copy of Kane & Lynch: Dead Men a few months back. When the sequel was starting to get hyped, I played it. Not a classic, but I liked it so picked up a copy of the sequel. Without a second hand market, I would probably have bought neither.

Not the Same as Cars

I've got a question I was hoping some of you who have a better grasp on this stuff than I do can help me with.

Whenever this question comes up, and it comes up a lot these days, you always get some developer or gamer who doesn't like the idea of used games jumping into the discussion. A common argument I hear from people who are for used game sales is that a game is just like a car, should Ford or GM get a cut of each used car sale? The standard response from a developer is that a car isn't the same as a digital good, a car suffers from wear and tear while a video game will not. A digital file suffers from no degradation and therefore should be treated differently than a physical good.

Now when I hear this my first thoughts are doesn't a disc suffer from degradation much in the same way any other physical object would? The next thought tends to be, you decided to create digital goods, tough titties if it doesn't degrade. Code in some self-degradation and see how many people buy your game.

Re: Not the Same as Cars

Code in some self-degradation and see how many people buy your game.

That's essentially what they are doing in this instance. The retail copy of the game comes along with a 1-time use code which when used enables the console it is used on to connect to the online play portion of the game. The code can't be transfered with the game though. In essence the resold copy is degraded.

No idea what their plan is for a person who buys the game and has a console go on the fritz though...

Re: Re: Not the Same as Cars

Re: Not the Same as Cars

Whether a good degrades or not only matters to the market and the market will only pay what it will pay. Besides, most digital goods go out of "style" and people lose interest. So while the good doesn't degrade, peoples interest in it does.

Re: Not the Same as Cars

Digital games suffer from a form a degradation in that technolgy moves forward. You could still play Castle Wolfenstein but you won't have the same kind of experience that you would with a game created today.

Also, for an older title that has a multiplayer aspect, will you really be able to use that feature forever? Probably not.

When you are talking about a game that has DRM (even a license key) then you really are talking about a physical good anyway.

I'd argue that you'll have a better experience with current hardware and a game from a generation or two ago anyway. You'll have more power and the bugs will be worked out.

After a terrible experience with a game from Massive that was buggy and had virtually no support, I don't think I will ever buy a first release again. Ask those developers about that. What happens when they release unplayable buggy crap? Why should I pay a premium for that?

Re: Re: Re: Not the Same as Cars

Massive,(World In Conflict)

And that was virtually no support. A support forum with limited moderation/developer input is very near no support at all. When I finally got in touch with a human they blamed my hardware. A couple of months went by, no changes to harware or drivers, the 3rd patch finally solved the problem. Last new release I will ever buy - after over 25 years of PC gaming.

Re: Not the Same as Cars

I would definitely think such an argument is - to put it bluntly - bullshit. They're argument only works so long as you assume they have bad accountants and generally idiotic employees to price in a way that doesn't already account for this so they can still make their development cost and a little extra back. This is of course assuming the no degradation argument actually stands up, which for many years it hasn't.

Either it only becomes true if you assume usable backup copies (which is not something that's always easy to do with consoles AFAIK), or the other extreme assuming that this wear and tear happens often and soon enough that you'd buy so early on that first hand copies are still being distributed (let alone cheap enough to compete with second hand as in every other market). This then assumes you're making low quality crap that breaks quickly, which would make people reticent to buy in the first place if it happened often enough.

Re: Re: Not the Same as Cars

I was thinking about that, I was looking into building a emulator for floppies because of some old hardware that needs them, then I realized something, emulator's for optical units could be used to interface directly with a t console game and you could use a NAS directly onto it.

The specifications for the connections are known so it wouldn't be that hard to get and arduino going.

Re: Re: Not the Same as Cars

I was thinking about that, I was looking into building a emulator for floppies because of some old hardware that needs them, then I realized something, emulator's for optical units could be used to interface directly with a t console game and you could use a NAS directly onto it.

The specifications for the connections are known so it wouldn't be that hard to get and arduino going.

Re: Not the Same as Cars

I have a classic example that is only several weeks old:

Starcraft II came out recently. I was thinking it may be time for a new game and I was seriously considering buying it. I found my original Starcraft disc and popped it in my computer. Turns out I had uninstalled it. When I got to the license screen I couldn't find my license number for the disc. I contacted Blizzard via email. They asked me to ship them the original disc and packaging AND pay $10 to get me a code for the game I already bought at full retail price the first time around. Considering I had registered my original copy I thought this was a bit much to ask since I already gave them all my info including the number I now need to re-install the very same copy I purchased so long ago.

I've decided NOT to purchase Starcraft II simply based on this experience from a company whose products I REALLY enjoy. So, the loss (my own fault mind you) of my serial number (physical good) and the inability to recover it from my registration with the publisher (which was required to play it at all in the first place) has led me to not purchase the next title which I really wanted.

Re: Not the Same as Cars

The comparison on the resale of cars is a moral judgment, not an economic. The is little economic basis for any resale payment to the original creator because the payments are too uncertain to provide incentive to create.

Although the game disc may not get wear and tear in the same manner as a physical object the do suffer from obsolescence. Just check the price of older versions of games vs the original price.

But that argument is a red herring. The issue at hand is whether the aftermarket maximizes the revenue to the originator. For cars, the aftermarket is a major selling point. The higher the retained resale value, the more the perceived value of new. No reason that economic logic wouldn't apply. Adding a cost to that resale value would only have a negative effect on the market for that good.

Re: Re: Not the Same as Cars

The argument's a red herring because you get paid once for one sale. What happens to the product after that is none of their concern - THEY GOT PAID already. FFS, what aren't they understanding about that?

As far as these companies wanting to charge for multiplayer from those with used copies - why? It's tagging out, tagging in, no extra nonsense necessary unless they *make* extra nonsense necessary (like tying accounts to serials and making transfers difficult or impossible), wanting to get paid again for the same sale.

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You are talking about EA. To access the online portion of their games you need to enter a 1 time use code the first time you go online with it. Anyone who buys the game used needs to pony up $10 for the privilege of going online with the game.

I think it is kind of greedy but it isn't the worst solution. I tend to buy games brand new anyway, I just trade in old ones to get a discount on new ones. The only time I buy used is if I missed a game while it was popular and it is steeply discounted. For example I just bought Mercenaries 2 at Blockbuster the other day for $2.50. It wasn't worth $60 to me but at the same price as a cup of coffee why not? Funny thing is their isn't any DLC released for that game. They didn't make any money off of me from the primary sale of the game but they could have if they offered some decent DLC!

Old games

Actually a game is a lot like a car, it does suffer from wear and tear. Have you tried to play doom on a window 7 pc? or Monkey Island? or any game over 10 years old? It doesn't work with out a new port of it or using DosBox. There are tons of old games that become relics as the new pc's emerge.

I keep most every game I have bought, I like to be able to rummage my shelf and pull out a game I enjoyed for days on end. I also like to go to yard sales and find old games I missed playing as I didn't have the money back then.

If a game studio wants my money, make a game that is worth playing for more then 10 minutes. Get away from chasing the movie titles with your crap games and create something new. And a little hint, it's not just about graphics. Game play is far more important to me.

Re: Re: Re: Old games

Hell no. Dig is one of my favs (I even bought the novel by Alan Dean Foster), but it's less well known. I play Full Throttle (and bought the kick ass soundtrack), but I didn't like it as much as the others, since it was too short....

Re: Re: Re: Re: Old games

Well, there's a slight difference between Doom and other games is that John Carmack is a strong supporter of open source. You'll be able to find some means to play Doom for some time. He even used code others created from the Wolfenstein source for the iPhone port...

HA HA HA

Just like the on going residuals from home sales, or basically any reselling.
I wonder if I can convince my employer from 10 years ago to pay me residuals for code I developed and they include in a software package they license on a yearly contact to 15 companies.... I would be rich instead of the company that can resell the same code over and over again. I can easily see why the used (reselling) market DOES cheat developers!
I want to be paid forever like Music and movie rights holders.

You know, I'm really amazed at how much hatred there seems to be towards Gamestop by developers. Here's a company that is completely focused on the product you sell. The advertise for you. They make sure they have your product on the day it's released. At least in some cases they have people working there who actually like games. And game developers seem hell bent on wanting them to go out of business? Are they idiots?

The absolute worst thing that could happen to the game industry would be for it to turn into a network-only DRM'd system. If purchasing a game becomes a death pact where only you can ever play that game, then you're going to see the game industry suffer. Either that or you're going to see $5-$10 iPad-type games become the norm.

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You know, I'm really amazed at how much hatred there seems to be towards Gamestop by developers. Here's a company that is completely focused on the product you sell. The advertise for you. They make sure they have your product on the day it's released. At least in some cases they have people working there who actually like games. And game developers seem hell bent on wanting them to go out of business? Are they idiots?

I know right? I wonder if developers realize just how man sales Gamestop brings in when they do those "trade in ____ and get extra $ towards _____ 2" like deals.

Used games will be a non-issue shortly.....probably by the next generation of game consoles. DLC is now a large percentage of PC games and MS is releasing more and more AAA content as Digital downloads as well.

On a related note Kotaku has a rather terse piece about Gamestop's "new" stores. They seem to be following in the footsteps of Blockbuster whereby they are not concentrating on the changing industry:

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IMHO, there's still a pretty big hurdle for 100% DLC games and that's price vs. value.

To give myself as an example - I have no problem paying 400/800 MS points for DLC to a game I've thoroughly enjoyed (1200+ is pushing it unless the content is something really special), and also have zero problem paying for an XBox Arcade title as they're usually smaller games that would not get released in physical formats due to costs.

However, I would *absolutely* not buy a game digitally at full price. It's worth far less to me because there's no resale value, and prices are less likely to come down in the same way that even new physical product does. It's for this reason that I refuse to even consider buying a PSP Go, and I would almost certainly buy a fraction of games I currently buy were I to find myself with no other choice.

I also have absolutely no doubt that when a digital-only model fails, the manufacturers will blame "piracy" rather than re-evaluate a broken business model.

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Actually, if you have a good, hard look at the most popular digital distribution model (Steam and Steamworks), you'll note that games are frequently on sale for ridiculously low prices, or even offered, on occasion, for free.

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And for the rest of the time reside at ridiculously high prices, far in excess of boxed copies, because, by and large, these digital retailers don't compete with each other and NOBODY competes with Steam on a meaningful level.

Today, I pre-ordered Civilization V. I could have done that on Steam for €50 (don't get me started on Euro customers getting jipped on currency conversion!) but I chose to get a boxed copy from any of about 15 retailers, for €30.

When you're competing with piracy, making your product worse than free seems like a bad idea. Pay for something you can only use once (god forbid you lose the code, etc), or copy a cracked version that you'll be able to use infinitely, for free.

It also helps the DLC market IMO. I bought Modern Warfare 2 for the 360 used for $30. When the two map packs came out for $15 a piece that everyone was bitching about I was happy to spend the $30 because that put me at the retail price of the game if I had bought it new. If I had paid $60 for it I'd be a lot less likely to spend $30 on 10 maps.

Activision is doing the sneaky thing of making you spend $10+ to enable online features in games you bought used in all their games since Skate 3. If you buy the game at retail you get a code to enable these features in the box.

A solution!

What they will discover pretty soon is that, the second market exist for a reason and it is good for them, the alternative being people going around for alternatives that are legal and have nothing to do with their products.

This open those companies wide open for people who really need the money and are developers and don't care if people sell those games after.

Game co's also fail to take into account the value inherent in the consumer. I can't pay $60 for a new game. Even if I could, I don't think I would. But game co's still make money off me. How? I go out, buy a game for $25, play it, love it, recommend it to all my friends, and half a dozen people I know end up buying it that otherwise might not have. The alternative is not my buying the game for $60. It's my not buying the game at all and potentially neither do those other 6 people. Word-of-mouth and friend-to-friend recommendation carry WAY more weight in my circle of friends than advertising and hype do.

Prediction

Since there will only be first time buyers and there's only a code for 1st run buyers, I'm going to see a failing of this game. You can only have so many people buy it first run, not to mention the fact that you've just segmented the market considerably. What happens with a kid who's 15, wants a game, but buys it used in Gamestop? Maybe he bought or borrowed the first few games and liked it but can't afford to play yet again. Since he's not a "loyal" customer, he's basically shafted. The company itself loses a customer in the long run.

All because of a poorly built business decision that the used market has destroyed them, without a glance at the mirror.

It's good to see that there are so many self-righteous GameShit whores here. "DURR I WANNA PAY TEN BUX LESS CUZ I'M CHEAP! WHO CARES IF ALL THAT MONEY GOES TO A COMPANY THAT TREATS EVERYONE LIKE SHIT AND NOT ONE CENT GOES TO THE PEOPEL WHO MAED THE GAEM?!!1" Fine, great, knock yourselves out.

Just remember, you're the ones calling the developers "greedy" when they want you to pay them for their product.

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read the article, read the posts (PROPERLY) and get with the programme.

WE WANT TO PAY WHAT THE GAMES ARE WORTH... AND we really want to have our f-ing ownership rights back!

i want to be able to pay a reasonable price for a game (i.e. £30GBP) and have the option to sell it on to someone who can get the same enjoyment out of it for NO EXTRA COST.
i also want to be able to buy a game off a friend which i have seen them playing and still be able to get online using the same serial AT NO EXTRA COST. is that really so much to ask?! hell, if i buy a used game of my friend and enjoy it, i may actually consider buying the sequel at full RRP!

i mean, c'mon it was that way for many years, if the gaming industry hadn't started inflating prices for short-term gains (a-la recording/movie industry), they may not have pushed SOOO many people down the piracy route and things may be a little better now. as it stands, I AM NOT PAYING £45+ for a game i can potentially only use once on ONE computer, i then cant sell on and if i lose the key i have to pay for a new one!

i pray to the digital gods that soon DRM and the like is written off by some of the better game producers as self-defeating and consumer-unfriendly. Then i can start buying new games at reasonable prices rather than having to trawl through endless torrent sites to find the one cracked version of a game that doesn't have some clowns trojan tucked away inside it.

PIRATE GAMES ARE NOT AS FUN AS THE REAL DEAL but sometimes we have to use them, even if its only to "try out" the game before buying it... in the steam sale... or used via amazon et al.

Speaking of Penny-Arcade

You might want to read their comic and post. If you're buying a used game from GameStop, you're not a THQ customer, you're a GameStop customer. I normally agree with almost everything you post on this site, but not really this time.

There are online services where people sign up, post the games they have, the games they want, and price-points to buy or sell each. I like that. I don't like "brick and mortar money-traps" building their entire business model out of basically cheating both their customers and their suppliers. You like to talk about untenable business models: look at some of the actual video-game-fan-press on this, no one really feels well-served by GameStop-style companies. Video game retailers are basically going the way of Blockbuster, and GameStop in particular has been *taking retail games off the shelves to make room for used games* for years - they deliberately cut down the store frontage available to their suppliers in order to increase the square footage devoted to the higher-margin used games.

GameStop and companies like them are literally cannibalizing their own market by reducing game publisher's financial rewards for working with them, they're alienating their own customers with pushy used-game sales, etc. I don't buy used games from GS anymore, and I probably spend upwards of $2k a year on games, gaming, consoles, PC hardware upgrades, etc.

Re: Speaking of Penny-Arcade

Couldn't agree more

It is astounding to me how these people came to be execs in the first place. Do they view their games as disposable items? The logic behind the statement implies that they do. And the fact is that this is the farthest thing from the truth in the world of game development.